Cokal reports robust production from BBM Anak coking coal asset

By Romel S. Gurky

ASX-listed coking coal mining firm Cokal Limited said on Wednesday that the first phase of its Bumi Barito Mineral (BBM) coking coal project in Indonesia?s Central Kalimantan Province, the BBM Anak, is achieving anticipated operational performance.

Cokal said in a statement that coal produced from BBM Anak is being transported to a stockpile at nearby Muara Teweh Port. The company continues to improve the facilities at the mine site such as drainage, sediment pits, haul road, stockpile areas and loading facilities. On-going improvement of the infrastructure is one of the company?s key priorities to ensure operational efficiencies and sustainability of mining activities.

Cokal said it is also focused on improving capacity at BBM Anak with the addition of four dump trucks which will be available on site by the third week of October 2017. The company has added more barges and increased barge loading capacity (from 300 tons to 380 tons, and 500 tons to 580 tons) as Cokal gains experience and knowledge of the transport logistics and river operations. This has resulted in significant savings in operational costs given the reduction in barging costs.

The company said it is in the process of establishing a local market for the its premium PCI coal product and is in advanced negotiations with several local parties for the sale of the first stockpile of approximately 7,000 tons. The company has taken appropriate steps to properly showcase the properties of the premium PCI coal product and has been careful to ensure its sale price will reflect its quality and uses.

Cokal expects the coal price realized on future sales to increase significantly, particularly as the Company is in the process of obtaining an export license enabling coal to be sold into international markets including Japan and China, where discussions with key customers continue.

Cokal Chairman Domenic Martino described the successful transition from an exploration company to a coal producer as a watershed moment for Cokal.

?With the successful operations and production from BBM, Cokal is very pleased that our strategic objectives have been validated, realizing the dream of company founder, the late Peter Lynch, who is greatly missed,?? Martino said.

?Cokal is building a strong export metallurgical coal business and we are able to do this with minimal capital to kick start the business at a time when the global outlook for coal is indicating strong demand, particularly in the Asian region,??Martino said.

Elsewhere, Cokal said it is focused on its next phase of growth and continues to advance the development of the BBM PCI mining area.

Site activities at BBM Anak have significantly contributed to the development works of Cokal?s BBM PCI project which remains a strong focus for the company.

?Once we get the BBM PCI project on line, production is expected to increase by 500Ktpa and will be sold to overseas buyers,? Martino said. This is in accordance with the forecasts provided in Cokal?s announcement of 1 August 2017.

Whilst cash flows from BBM Anak coal sales are anticipated to be sufficient for Cokal to fund BBM PCI development costs, the Cokal Board of Directors have made a prudent and conservative decision to raise additional capital. Cokal said it has entered into an agreement to raise up to A$4 million in funding for protection against contingencies and to ensure the development of BBM PCI is able to be completed on time by December 2017 / January 2018, thereby securing near-term cash flow for Cokal.

Cokal has entered into a Convertible Note Agreement with New York based MEF I, L.P. (Magna), whereby Cokal will raise up to A$4m through the issue of Convertible Notes (the ?Notes?) in three tranches.

Funds raised will be available for development of BBM PCI, general working capital and corporate purposes.

The Directors of Cokal believe that the Notes represent an attractive funding solution for Cokal, minimizing equity dilution for existing shareholders, whilst Cokal undertakes development of the BBM Asset and realizes the financial and operational benefits of ramping-up near-term coal production.

Editing by Reiner Simanjuntak